Stephane Henry, CEO of Investment Professionals Ltd (IPRO), an integrated financial services group which has been present in Mauritius since 1992, continued his interview to AfricaMoney with in-depth views on the major sectors powering Africa. Our financial expert also spoke on the challenges facing three key sectors of the Mauritian economy – sugar, tourism and financial services.

  • With Nigeria being crowned the largest economy in Africa after the GDP rebasing exercise, Nigeria’s Finance Minister mentioned that the ‘psychological’ impact would spur greater investment into the West African frontier economy. What are your views?

I think that in terms of investments, the rebasing of the Nigerian GDP will have a limited impact. Few people were really surprised that the GDP has increased by 90% after the rebasing. What matters more for investors is the growth rate. As a matter of fact, Nigeria has been one of the worst markets in terms of performance since the start of the year because of the dispute between the Nigerian President and the ex-head of central bank, Mr Sanusi, who was forced to leave the Central Bank of Nigeria and was replaced by the ex-CEO of Zenith Bank.

Then again, Nigeria has been very volatile since the beginning of the year, especially its currency Naira. So, Nigeria is quite a challenging place to invest in and is very difficult to analyse. For instance, we now have proof that almost half of the economy was outside the previous figures published by the Nigerian authorities. But, it nevertheless remains a place with a lot of vibrancy and a lot of dynamism which can be seen in terms of being the birthplace of leading African conglomerates like the Dangote Group, owned by Aliko Dangote who is renowned as the wealthiest person in Africa.

Overall, I would advise caution to investors eying Nigeria as it forms part of the Anglophone Western African belt, which, together with Ghana, has been facing some economic difficulties.

  • Could you tell us about the key investment sectors that AML is focusing on? Which are the sectors that are seeing maximum investor interest?

The sectors into which we invest are the ones that hold most promise for international institutional investors. There are four main sectors we focus on. The first one is the banking sector. When a region sees significant growth, as it is the case now in Africa, banks will typically benefit from that growth. They will be in a position to expand their loan books, both for the corporate sector and for the retail sector. Accordingly, one will expect profits from banks to improve significantly when there is real economic dynamism happening in a specific region.

The second important sector we are investing into is the telecommunications sector through two main investments: Safaricom in Kenya and Sonatel in Francophone Western Africa. Sonatel is a subsidiary of France Telecom, while Safaricom is 40% owned by Vodafone. We see increasing demand from added value services related to mobile telephones, like for instance, the e-payments services which have been offered by Safaricom in Kenya for almost ten years. Africa is certainly a place where the telecommunication sector has been very dynamic with lots of investments, and companies which have invested into this sector in Africa are now showing the benefits of their investments.

The third interesting sector for investments is the cement industry with lots of new roads and lots of new constructions for both residential and for building industries, etc. We see an increasing demand for cement and a number of groups which have been present in Africa for that industry are investing a lot into that sector to build up their capacities and certainly, this is the sector which will deliver interesting growth in the future.

And the last sector where we invest a lot of our equity fund is the consumption sector, primarily consumer staples and the agricultural business for a number of companies in Zambia, in Kenya, in Nigeria which should benefit from a higher demand from the middle class population which is expanding. The growing middle class is expected to consume more and more during next ten to twenty years. So, all companies which are producing for the growing middle class will definitely benefit from the upsurge in demand.

  • Finally, please let us know your views on the Mauritian economy regarding opportunities and threats to investing in Mauritius.

The Mauritian economy is certainly at a crossroads now with huge challenges affecting three of the key sectors of the economy.

First of all, the sugar sector has been hit by declining international sugar prices now that Mauritius is not protected by favourable quotas from the European Union. The prices and the volume of sugar being sold by Mauritian producers are both on a downturn. We should be concerned by the over supply that we can see internationally, which results in lower international prices of sugar and in turn eats into the profit of the local sugar groups.

Second is tourism, where we have seen that over the last five years, the number of tourists coming to Mauritius has barely grown. On the other hand, room supply has increased, which means that occupancy rates are logically going down, and if the demand for rooms is going down, prices are going down as well. All the main hotel groups in Mauritius have a lot of debt and interest charges weighing on their books, and we are accordingly quite concerned about the future of this sector.

And lastly, the financial sector, which has gotten off to a good start, but will continue to be affected by uncertainty over the Double Taxation Avoidance Agreement (DTAA) with India. We have seen important investment funds moving from Mauritius to Singapore and, as previously mentioned, the Indian stock market and the Indian rupee have not yielded good returns. So, there is currently a dip in investments routed to India from Mauritius. Overall, all global business companies (GBCs) which have grown over the last twenty years thanks to the DTAA, are now seeing hurdles come in the way of growing their client base and are working more and more with countries in Africa, in relation to investments into Africa.

However, the status we had achieved as a preferred route for India investments has suffered and will affect GBCs which have traditionally done a lot of business in relation to India. So, the good news is that the uncertainty over the India tax treaty is forcing GBCs to do more business with Africa. But, it cannot be denied that their main source of income, which has always been India, is struggling and the threat with regards to the India-Mauritius tax treaty is adversely impacting this sector.

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